Alabama One Released From Conservatorship, Legal Troubles Remain
The Alabama Credit Union Administration said Wednesday it terminated the conservatorship of the $582 million Alabama One Credit Union, which has been at the center of widely publicized controversies and lawsuits since 2013.
The Alabama regulator took control of the Tuscaloosa-based credit union in August 2015. The regulator claimed the credit union officers and employees showed persistent patterns and practices of allowing insiders to have loans on preferential terms and conditions, falsified loan information for insider auto loans and accepted things of value in exchange for making loans, among other charges.
The end of the conservatorship, however, does not mean the end of Alabama One’s legal troubles.
The former president/CEO, John Dee Carruth, employees and board members have two lawsuits pending in federal court. One lawsuit, filed by Carruth, employees and board members, is appealing the conservatorship. They are arguing the state’s takeover of the credit union was unlawful and was part of a political agenda. The other lawsuit, filed by Carruth, includes allegations against lawyers that they allegedly participated in a conspiracy that violated Carruth’s constitutional rights of due process and other issues.
A hearing on the conservatorship appeal is scheduled for March 1 though it’s uncertain whether any final rulings will be made. That lawsuit has the potential to overturn the conservatorship, which would reinstate Carruth, employees and board members.
“This fight is long from over,” Carruth said in a prepared statement.
ACUA Administrator Sarah H. Moore said in a prepared statement that Alabama One’s management team and employees led by President/CEO William Wells worked “tirelessly to restore sound operations to safeguard Alabama One’s members’ hard-earned money.”
“The new leadership of Alabama One transformed the credit union into a great place to work and do business,” Moore said.
According to the ACUA, the members of the board of directors and supervisory committee were “elected by the conservator to serve Alabama One’s members.”
“All of the actions of Alabama Governor Robert Bentley’s appointee, Sarah Moore, will be overturned including her ‘selection’ (not “election”) of the new Alabama One officers and directors,” Carruth said in a prepared statement.
At the end of 2015, Alabama One posted a net income loss of $8 million. At the end of 2016, the credit union showed a net income gain of $70,861, according to the credit union’s NCUA financial performance reports. Although its total loans increased from $258 million in 2015 to $261 million in 2016, its loan income declined from $14.6 million to $13.5 million in the same years.
Alabama One’s net worth declined slightly from 9.24% in 2015 to 9.21% in 2016, and its ROAA improved from -1.36% in 2015 to 0.01% last year, according to NCUA financial performance reports.
Despite the credit union’s negative publicity over the last four years, its membership has increased from 59,012 in 2013 to 61,023 in 2016.
The storm of controversies surrounding Alabama One began after October 2013 when Danny Ray Butler, a long-time member and local businessman, was indicted by a federal grand jury.
In its 51-count indictment, the jury charged Butler with defrauding the Small Business Administration through a loan he had taken from West Alabama Bank and Trust, and kiting checks between West Alabama and Alabama One.
Butler pleaded guilty in February 2014 and was sentenced to three years in federal prison in Talladega, Ala., in September 2014.
Members raised questions about the credit union's relationship with Butler. They filed lawsuits over losses they said they had suffered because of loans the credit union had made for Butler in their names.
Those lawsuits were followed by even more lawsuits by members, employees, state regulators and others claiming fraud, a hostile workplace environment, compliance and state law violations, conspiracy, breaches of fiduciary duties and the waste of corporate assets.
In April 2015, the ACUA and the NCUA filed a cease and desist order to force the troubled credit union to replace its CEO, COO and chief lending officer.
After the credit union was conserved in August 2015, it took until October before the dismissed employees and board members were informed of the alleged grounds for the ACUA's action to place the credit union into conservatorship.